GDP growth may hit 8% in 2005: Djisman

Johannes Simbolon, The Jakarta Post, Jakarta

After years of an economy in crisis and slow growth, Indonesia is poised to record an accelerated growth rate starting in 2005, according to a local economist on Tuesday.

The strong rebound will come on the back of global recovery and regained confidence in the government after the completion of general elections in 2004, Djisman S. Simandjuntak, executive director of Prasetiya Mulya Business School, said.

"No matter who wins the presidential election, Indonesia will be heading for a strong economic rebound," Djisman said in a presentation at The Jakarta Post.

With a steady decline of investment and the domestic consumption being the main factor behind the slow economic growth over the past several years, Indonesia has reached the bottom of the economic slump, so has likely seen the worst of it.

"Nothing is worse than our situation now," he said.

Once the general elections are over and Indonesia has its president, gone will be many of the worries over political uncertainties which have thus far made many businessmen and investors reluctant to bring most of their funds into the country.

Capital owners who took their funds out of Indonesia in the aftermath of the economic crisis have started bringing back their money back to Indonesia, which is among others reflected in the increasing number of shopping center projects across Jakarta, Djisman said. However, they are still reluctant to bring back much of the funds on worries over general elections next year.

Djisman said not only the previous investors will come back Indonesia, but also new investors, who are attracted to the huge market potential of the nation.

"We deserve higher foreign investment," he said.

Djisman is optimistic that the 2004 elections would go smoothly and the current President, Megawati Soekarnoputri would face no serious challenges in her bid to be reelected. If reelected, Megawati will have no other option but to improve the corrupt government.

"The quality of the government is going to improve, because nothing is worse than the current situation," Djisman explained.

The bright outlook on the political scene coupled with global recovery is likely to enable Indonesia to reach a high economic growth of 8 percent in the years starting from 2005 as the country did during the "positive shock of the economy" in the period of from the late 1960s to early 1970s.

After this new "positive shock period", the economic growth will be stay at a high rate of around 7 percent.

Several international agencies have predicted that after the general elections, Indonesia will record a brisker economic growth along with the global recovery.

The Organization for Economic Cooperation and Development (OECD) in its latest Economic Outlook released late last month declared that the global slump had been over and the global economy was heading for strong growth in the coming years. It predicted growth should pick up to near five percent by 2005 in the wider Asian region comprising China, Indonesia, Thailand, Singapore and the Philippines.

Earlier, the World Bank predicted the Indonesian economy to grow by 4 percent next year. After the general elections, the growth will get progressively stronger at 4.5 percent in 2005 and 5 percent in 2006.